Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.

Chap 3-1
Chapter 3

Measures of Central Tendency


Basic Business Statistics
11
th
Edition
Chapter Topics
 Measures of Central Tendency
* Mean
* Median
* Mode

 Measures of Shape
* Skewness
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-2
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-3


Measures of Central Tendency

Central Tendency
Arithmetic
Mean
Median Mode Geometric Mean
n
X
X
n
i
i ¿
=
=
1
n / 1
n 2 1
G ) X X X ( X × × × = 
Middle value
in the ordered
array
Most
frequently
observed
value
Rate of
change of
a variable
over time
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-4
Measures of Central Tendency:
The Mean (Arithmetic Mean)
 The arithmetic mean (often just called “mean”)
is the most common measure of central
tendency

 For a sample of size n:
Sample size
n
X X X
n
X
X
n 2 1
n
1 i
i
+ + +
= =
¿
=

Observed values
The i
th
value
Pronounced x-bar
Mean (Arithmetic Mean)
 Mean (Arithmetic Mean) Of Data Values

 Population mean
1 1 2
N
i
i N
X
X X X
N N
µ
=
+ + +
= =
¿
Population Size
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-5
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-6
Measures of Central Tendency:
The Mean (Arithmetic Mean)
 The most common measure of central tendency
 Mean = sum of values divided by the number of values
 Affected by extreme values (outliers)

(continued)
0 1 2 3 4 5 6 7 8 9 10
Mean = 3
0 1 2 3 4 5 6 7 8 9 10
Mean = 4
Mean (Arithmetic Mean) From a
Frequency Distribution
 Approximating the Arithmetic Mean
 Used when raw data are not available



Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-7

Calculation of Grouped Mean
Class Interval Frequency Class Midpoint fM
20-under 30
30-under 40
40-under 50
50-under 60
60-under 70
70-under 80
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-8
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-9
Measures of Central Tendency:
The Median

 In an ordered array, the median is the “middle”
number (50% above, 50% below)





 Not affected by extreme values
0 1 2 3 4 5 6 7 8 9 10
Median = 3
0 1 2 3 4 5 6 7 8 9 10
Median = 3
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-10
Measures of Central Tendency:
Locating the Median
 The location of the median when the values are in numerical order
(smallest to largest):



 If the number of values is odd, the median is the middle number

 If the number of values is even, the median is the average of the
two middle numbers

Note that is not the value of the median, only the position of
the median in the ranked data

data ordered the in position
2
1 n
position Median
+
=
2
1 n+
Median From a Frequency
Distribution
( )
p
med
1
2
:
L the lower limit of the median class
cf = cumulative frequency of class preceding the median class
f = frequency of the median class
W = width of the median class
N = tot
p
med
f
cf
Median L W
f
Where
¿ +
÷
= +
=
al of frequencies
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-11
Calculation of Grouped Median

Cumulative
Class Interval Frequency Frequency
20-under 30 6 6
30-under 40 18 24
40-under 50 11 35
50-under 60 11 46
60-under 70 3 49
70-under 80 1 50
N = 50
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-12
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc.. Chap 3-13
Measures of Central Tendency:
The Mode
 Value that occurs most often
 Not affected by extreme values
 Used for either numerical or categorical
(nominal) data
 There may may be no mode
 There may be several modes

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Mode = 9
0 1 2 3 4 5 6
No Mode
 Five houses on a hill by the beach
Review Example
$2,000 K
$500 K
$300 K
$100 K
$100 K
House Prices:

$2,000,000
500,000
300,000
100,000
100,000

Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-14
Mod From a Frequency
Distribution
( )
1
1 2
A
(
= +
(
A + A
¸ ¸
Mod Lm W
Lm = the lower limit of the mod class

∆1 =
the difference between the mod
class and the class before the mod
class

∆2 =
the difference between the mod
class with class after mod class

w = width of the mod class
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-15
Calculation of Grouped Mod
Class
Interval
Frequency
(f)
MidPoints
(M)

20 -30
30-40
40-50
50-60
60-70
70-80


6
18
11
11
3
1

25
35
45
55
65
75
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-16
Shape of a Distribution
 Describes how data are distributed
 Measures of shape
 Symmetric or skewed
Mean = Median

Mean < Median Median < Mean
Right-Skewed Left-Skewed Symmetric
Basic Business Statistics, 11e © 2009 Prentice-Hall, Inc. Chap 3-17

.Chapter Topics  Measures of Central Tendency * Mean * Median * Mode  Measures of Shape * Skewness Chap 3-2 Basic Business Statistics. 11e © 2009 Prentice-Hall. Inc.

.Measures of Central Tendency Central Tendency Arithmetic Mean Median Mode Geometric Mean XG  ( X1  X 2    Xn )1/ n X X i 1 n i n Middle value in the ordered array Most frequently observed value Rate of change of a variable over time Chap 3-3 Basic Business Statistics. Inc. . 11e © 2009 Prentice-Hall.

Measures of Central Tendency: The Mean (Arithmetic Mean)  The arithmetic mean (often just called “mean”) is the most common measure of central tendency  Pronounced x-bar For a sample of size n: The ith value X Sample size X i1 n i n X1  X 2    Xn  n Observed values Chap 3-4 Basic Business Statistics.. . Inc. 11e © 2009 Prentice-Hall.

Chap 3-5 X N Population Size .. Inc.Mean (Arithmetic Mean)  Mean (Arithmetic Mean) Of Data Values  Population mean X1  X 2   X N   N N i 1 i Basic Business Statistics. 11e © 2009 Prentice-Hall.

. 11e © 2009 Prentice-Hall. Chap 3-6 .Measures of Central Tendency: The Mean (Arithmetic Mean) (continued)    The most common measure of central tendency Mean = sum of values divided by the number of values Affected by extreme values (outliers) 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 Mean = 3 Mean = 4 Basic Business Statistics. Inc.

Chap 3-7 . Inc. 11e © 2009 Prentice-Hall.Mean (Arithmetic Mean) From a Frequency Distribution  Approximating the Arithmetic Mean  Used when raw data are not available Basic Business Statistics.

Calculation of Grouped Mean Class Interval Frequency Class Midpoint 20-under 30 30-under 40 40-under 50 50-under 60 60-under 70 70-under 80 fM Basic Business Statistics. 11e © 2009 Prentice-Hall. Inc. Chap 3-8 .

11e © 2009 Prentice-Hall.Measures of Central Tendency: The Median  In an ordered array. the median is the “middle” number (50% above. 50% below) 0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10 Median = 3  Median = 3 Not affected by extreme values Chap 3-9 Basic Business Statistics. . Inc..

Measures of Central Tendency: Locating the Median  The location of the median when the values are in numerical order (smallest to largest): n 1 Median position  position in the ordereddata 2  If the number of values is odd. only the position of the median in the ranked data 2 Basic Business Statistics. the median is the average of the two middle numbers  Note that n  1 is not the value of the median. 11e © 2009 Prentice-Hall. the median is the middle number If the number of values is even.. Inc. Chap 3-10 .

Inc. Chap 3-11 .Median From a Frequency Distribution  f 1  cfp Median  L  2 W  fmed Where : L  the lower limit of the median class cfp = cumulative frequency of class preceding the median class fmed = frequency of the median class W = width of the median class N = total of frequencies Basic Business Statistics. 11e © 2009 Prentice-Hall.

Chap 3-12 .Calculation of Grouped Median Cumulative Class Interval Frequency Frequency 20-under 30 6 6 30-under 40 18 24 40-under 50 11 35 50-under 60 11 46 60-under 70 3 49 70-under 80 1 50 N = 50 Basic Business Statistics. Inc. 11e © 2009 Prentice-Hall.

Measures of Central Tendency: The Mode      Value that occurs most often Not affected by extreme values Used for either numerical or categorical (nominal) data There may may be no mode There may be several modes 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 0 1 2 3 4 5 6 Mode = 9 Basic Business Statistics. Inc.. 11e © 2009 Prentice-Hall. No Mode Chap 3-13 .

Inc.Review Example  Five houses on a hill by the beach $2.000 500.000 300.000 K House Prices: $2. 11e © 2009 Prentice-Hall. Chap 3-14 .000 $500 K $300 K $100 K $100 K Basic Business Statistics.000.000 100.000 100.

11e © 2009 Prentice-Hall. Inc.Mod From a Frequency Distribution   1 Mod  Lm    W  1   2   Lm = the lower limit of the mod class ∆1 = the difference between the mod class and the class before the mod class class with class after mod class ∆2 = the difference between the mod w = width of the mod class Basic Business Statistics. Chap 3-15 .

Inc.Calculation of Grouped Mod Class Interval 20 -30 30-40 40-50 50-60 60-70 70-80 Frequency (f) 6 18 11 11 3 1 MidPoints (M) 25 35 45 55 65 75 Basic Business Statistics. Chap 3-16 . 11e © 2009 Prentice-Hall.

Shape of a Distribution   Describes how data are distributed Measures of shape  Symmetric or skewed Symmetric Mean = Median Left-Skewed Mean < Median Right-Skewed Median < Mean Basic Business Statistics. 11e © 2009 Prentice-Hall. Chap 3-17 . Inc.

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